Key performance indicators (KPIs) are the measuring stick of a business's performance over a given time period. KPIs will not only show whether you are meeting your goals but also guide you in your strategy. If you are doing well in your KPIs, your strategies are working. If not, you might need to go with a different approach.
You will only get the full value of KPIs if you choose the right ones for your dealership.
Choosing relevant KPIs
There is no set number of key performance indicators your dealership should have. However, picking one to two KPIs per goal or objective you set is generally considered best. A KPI must be measurable with numbers like sales statistics, customer reports, etc. You can use KPIs to measure more than just sales, but also the performance of your service technicians, traffic to your website and staffing turnover.
According to Hubspot, there are many types of KPIs, including:
- A quantitative KPI relies on numbers to gauge progress. E.g., "Sales team to generate 100 sales-qualified leads every month."
- A qualitative KPI looks at opinion- or feeling-based data. E.g., "Brand sentiment."
- A leading KPI can predict future performance. E.g., "Website traffic." More traffic can mean more conversions, more leads, and more revenue.
- A lagging KPI describes a past result. E.g., "Turnover rate."
- An input KPI measures the assets, time, and resources needed to complete a certain action or project. E.g., "Employee count, budget."
- A process KPI assesses efficiency and productivity within the business. E.g., "Average sales call time.
Before choosing your KPIs, you need to set business goals. These goals should be broad and reflect what you want to accomplish in a set time period. The goals may be expanding customer base, high customer satisfaction, increasing sales or faster service. Note that these goals, while broad, are still measurable.
With your goals selected, you will set your KPIs. While your goals are no doubt broad, your KPIs should be specific, meaning only one number represents your KPI. For example, if you set a goal of increasing sales, your KPIs may be gross profit per sale and aging of stock. With these metrics, you can measure both how much money you are making from sales as well as how long an average unit stay on your lot, costing you money.
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Determine what you want the KPI to measure. For example:
- Sales and Profit (Total sales, average profit per sale, sales per lead)
- Customer Satisfaction (Total reviews, ratio of positive to negative reviews)
- Customer Engagement (Social media engagement, how long visitor stays on site)
- Marketing (Leads captured, website visits)
- Service Performance (Labor gross percentage, average hours sold per repair order)
Keep in mind that when you set both your goals and KPIs, they should work together to measure the overall success of your dealership. Each of your KPIs are subplots that, while different on the surface, combine to tell the complete story of your dealership. Developments in those KPIs will have an effect on each other and your dealership.
For more ideas on KPIs, check out this KPI guide for dealerships by eProfitFocus.
Set the right time to track your KPIs
After you set your KPIs, you need to determine the best timing to track them. If you do it too much, you might make rash changes. However, if you do it too little, you will not have time to adjust your practices to meet your goals. Generally speaking, Hubspot recommends you track your KPIs monthly or quarterly.
When you meet with your team to discuss your KPIs, it is a good time to review the why. Ask yourself and your team, particularly management, why are your numbers going up or down. Consider all of the factors that contributed to those numbers, even if it doesn't have to do with strategy. For example, if the flu went through your dealership and knocked out half your staff for a week, that may play a role in low numbers. You should consider market trends like hot and cold times to buy a vehicle.
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Considering the variables that come along during a period of time is important to understanding your numbers. These should not be excuses. Rather, it gives you a better understanding of what to do when there are roadblocks.
For example, if you factor in that a particular month is historically bad for sales, it may be a good month to put greater effort into capturing leads through marketing.
Learn More: How To Choose the Right KPIs for Your Business
Adjust your KPIs on performance, growth
Each year, as you're making your annual plan, you might consider changing your goals and KPIs. Sometimes you will find a KPI you set does not really hold as much value as another KPI measuring the same goal.
For example, if you have a goal of high customer engagement and your KPI is total social media engagement, you might find that number to be low. However, then you discover that viewers to your website look at three or four pages per visit. That might tell you that your customers are definitely engaged, but they choose to do it through your website rather than social media. So as you put together your annual plan, you might set pages per visit as your engagement KPI.
Conclusion
It is almost impossible to help your dealership grow without tracking its progress. KPIs are the metrics by which you can measure the success of your dealership's individual departments and its overall success. By selecting a few important KPIs for your goals, you can determine what direction you need to take your dealership to increase your profits.
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If you want to learn how EverLogic might be able to help your dealership meet some of those KPIs, tap on the button below to view our free demo.
